'Slight signs' of recovery in Scottish manufacturing not expected to continue

Published on Wednesday 14 July 2010 14:52

RECENT modest growth in the Scottish manufacturing industry is not expected to continue, according to a survey.

There were signs of a manufacturing-led recovery during the past three months, but it is unlikely to continue in the short term because of increasing cost pressures, the Scottish Chambers of Commerce's (SCC) Business Survey found.

It also noted a "pick up" in the tourism sector and "slight signs" of increased activity in construction. However, this was against a backdrop of forthcoming public sector cuts which will have a knock-on effect on suppliers.

SCC's head of policy and public affairs, Garry Clark, said: "These results show that we cannot take the recovery for granted.

"Even in the manufacturing sector, which has led the upturn in the Scottish economy over the past few quarters, there are now concerns of an anticipated drop in orders over the next three months, with cost pressures from raw materials and transportation on the rise.

"At the same time, the construction sector, which has seen some signs of increased activity, is worried over a lack of future work from the public sector."

He said businesses anticipate a "dampening effect" on economic recovery as a result of public spending cutbacks.

The survey suggests the growth in manufacturing and construction will "weaken" in the third quarter.

Retail spending is expected to remain flat and overseas tourism weak. The scaling-back of public spending will influence business confidence and could lead to harsh trading conditions for some firms.

Mr Clark said: "Business needs certainty and stability, and cuts must be managed intelligently if we are to minimise any negative impact on local communities and local businesses in Scotland."